France: Government unveils plans to reform labour laws

During his 2017 election campaign, President Emmanuel Macron set out his plans to reform France’s labour code by ordinance – allowing him to make changes without the need for lengthy parliamentary debate. The use of ordinances is in accordance with Article 38 of the constitution, which states: ‘In order to implement its programme, the Government may ask Parliament for authorisation, for a limited period, to take measures by Ordinance that are normally the preserve of statute law’.

On 2 August 2017, parliament passed a law which authorises the government to take such measures. On 31 August, the government published the draft of five ordinances for consultation, which were adopted by the Council of Ministers on 22 September. The ordinances are designed to simplify social dialogue and participation and to clarify redundancy rules.

Simplifying social dialogue

Collective bargaining

Ordinance 2017-1385 concerns the interactions between sectoral and company-level agreements. It reduces the importance of sectoral agreements and gives companies’ agreements a central place in the system of collective bargaining.

The ordinance lists specific topics (such as minimum wages) on which sectoral agreements will continue to prevail. It also includes a limited list of topics on which it will depend on the agreement as to whether or not it prevails over company-level agreements. Sectoral agreements will apply for all other matters only in the absence of company-level agreements. This means that, for a large number of issues, company-level agreements will prevail.

The reform will also facilitate the conclusion of company-level agreements. For instance, it will be easier to initiate a referendum on agreements signed by unions for which only 30% of workers voted at the last workplace election. This will allow all workers to have a say as well as giving small unions the opportunity to participate in negotiations. It will also be easier to negotiate a collective agreement in the absence of union representatives, mainly in companies with less than 50 employees.

If employees refuse modifications to their working conditions (such as salary) that are based on a collective agreement, employers can implement a single dismissal procedure (instead of several).

Another change is that it will be possible to adapt sectoral agreements to the size of the company. For example, some of their stipulations may not cover small businesses.

Information and consultation bodies

Under the existing law, there are three main employees’ information and consultation bodies: the staff representatives (délégués du personnel); the works council (comité d’entreprise); and the health, safety and working conditions committee (CHSCT). Under Ordinance 2017-1386, in companies with 50 employees or more, these bodies will be merged into one economic and social committee (ESC).

Trade union representatives (délégués syndicaux) could also be incorporated into the ESC by collective agreement. Currently, union representatives have the exclusive right to negotiate in companies with 50 employees or more. The new ordinance states that, by majority collective agreement, social partners will be able to authorise the unified committee to negotiate collective agreements.

The ESC will take over the functions of the existing bodies and its budget will be at least equivalent to that of the works council. The ESC will also have the capacity to take legal actions.

Clarifying redundancy regulations

Economic redundancies

One objective of Ordinance 2017-1387 is to change the rules relating to economic reasons for redundancies. Under existing law, when a company is part of a group, the whole group’s economic situation is taken into account when looking at redundancies. Therefore, a French company experiencing heavy economic difficulties might be unable to proceed with economic dismissals if foreign entities of the group pursuing the same activity are not encountering such difficulties, as the overall group would not be considered as facing economic difficulties. Under the new ordinance, the economic situation will be assessed at company level, including only those subsidiaries that carry out the same activity and are located in French territory.

The obligation to redeploy workers prior to any economic dismissals (considered as a source of insecurity for and by businesses), will also be made less stringent. The obligation will be easier to fulfil by employers, as they will have the right to proceed to collective offers by means of electronic tools (such as the company’s intranet). The duty to offer redeployment abroad within the same group will also be removed.

Redundancy criteria and process

The ordinance also clarifies criteria for the order of dismissals (which employees should be dismissed first) by refining the concept of occupational category, on which the order is based. Social partners will be allowed to set their own definitions by collective agreement.

Finally, voluntary redundancy schemes (plans de depart volontaire), which are intensively used but have previously had no legal basis, will be secured through a procedure known as the collective conventional termination of contract (rupture conventionnelle collective).

Compensation for unfair dismissal

Under the existing law, the employer must pay a just level of compensation if a dismissal is considered unfair. The judge has the power to determine the level of compensation on a case-by-case basis. The only legal requirement is that a minimum amount equivalent to six months’ salary must be paid to employees who have at least two months’ seniority in a company with ten or more employees.

Ordinance 2017-1387 reduces the power of judges to determine the level of compensation. It sets a scale for the amounts to be paid by the employer in the case of wrongful dismissal. The scale is set according to the seniority of the employee; from a minimum of half-a-month (for less than one year of seniority) to a maximum of 20 months. The maximum amount is calculated in the same way irrespective of the size of the company, but the minimum amount depends on company size, with a distinction between small businesses (up to 11 employees) and larger ones. The scale is applicable in cases where a dismissal is null and void (for example, based on discrimination) and in cases of violation of fundamental rights.

Other key measures

Ordinance 2017-1387 simplifies, clarifies and secures the procedural rules that apply to redundancy. Under the law as it is now applied by courts, the system is very strict. An imprecise reason in the letter of dismissal can lead to a dismissal being categorised as unfair. The ordinance proposes a pro forma dismissal template and will allow the employer to provide additional information before the court. The goal is to reduce the number of cases where an employer has to pay compensation for a dismissal that is deemed unfair, but is in fact based on a legitimate cause.

The ordinance will reduce the period for bringing an action against a contract termination to one year; the previous law of 14 June 2013 had already reduced it to two years (less in some cases).

The reform also encourages quick settlements before the local labour courts. Other forms of agreements, such as conventional terminations of contracts, are also promoted.

Next steps for the reform process

The ordinances now need to be ratified by parliament to acquire legal status. The reforms will then gradually come into force. Some provisions already apply, while others should commence on 1 January 2018 at the latest.